Tax Advice for Investment Property Owners – Construction Costs, Co-ownership and Capital Gains Tax
When considering your tax obligations for your investment property, it is worth taking note of construction costs, co-ownership and capital gains tax.
Getting construction costs right
Did you know you can claim some building costs, including extensions, alterations and structural improvements as capital works deductions?
As a general rule, you can claim capital works deductions at 2.5% of the construction cost for 40 years from the date the construction was completed.
If the previous owner claimed a capital works deduction, they are required to give you the information they used to calculate the costs, so it always pays to ask them for this.
If they didn’t use the property to produce assessable income you can obtain an estimate from a professional. If you use the services of a professional make sure they are qualified, use a
reasonable basis for their valuation and exclude the cost of the land when working out construction costs.
Co-owning a property
If you own a rental property with someone else, you must declare rental income and claim expenses according to your legal ownership of the property. As joint tenants, your legal interest will be an equal split, and as tenants, in common, you may have different ownership interests.
Getting your capital gains right when selling
When you sell your rental property, you will make either a capital gain or a capital loss. This is the difference between what it cost you to buy and improve the property, and what you
receive when you sell it. If you make a capital gain, you will need to include the gain in your tax return for that financial year. If you make a capital loss, you can carry the loss forward and deduct it from capital gains in later years.
If you have further queries about your tax obligations in regards to your investment property or need any other assistance with your finances, please call one of our STS accountants – we’re more than happy to answer any of your questions at any time.
Call us today: Torquay (03) 5261 2262 / Winchelsea (03) 5267 2673
